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Australia Consults On Tightening Asset Tax Relief

Friday, July 14, 2017

The Australian Government has published draft legislation that will tighten the rules around travel expenses for property investors and limit depreciation deductions for certain plant and equipment used in residential investment properties.

According to a press release from Revenue Minister Kelly O'Dwyer, "There are concerns around the abuse of deductions for travel expenses that do not represent a legitimate commercial need."

Under the proposed changes, travel deductions for individual investors with residential investment properties, including travel costs associated with inspecting and maintaining properties, will no longer be deductible. However, investors will still be able to claim a deduction for the expense of engaging third parties (such as real estate agents) to provide property management services for investment properties.

Providing the legislation is carried, the change would apply from July 1, 2017.

O'Dwyer also explained that the tax system "currently creates opportunities for plant and equipment to be depreciated by multiple owners of a property in excess of its actual value."

"Significant abuse of the tax system has been witnessed in relation to property investors and advisers claiming excess deductions."

The Government intends to limit plant and equipment depreciation deductions for investors in residential investment properties to assets not previously used. Plant and equipment items are usually mechanical fixtures or those which can be "easily" removed from a property, such as dishwashers and ceiling fans.

If the legislation is carried, the measure would apply from July 1. Plant and equipment used or installed in residential investment properties as of May 9, 2017, (or acquired under contracts already entered into at 19:30PM AEST on May 9) will continue to give rise to deductions for depreciation until the investor no longer owns the asset, or until the asset reaches the end of its effective life.

A consultation on the draft legislation is open until August 10.

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